Transcript

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BLOOD GLUCOSE MONITORING SYSTEMS
Product Completion Case Study

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EXECUTIVE SUMMARY
RR Donnelley Global Turnkey Solutions developed and implemented
a comprehensive model that helped a Fortune 500 medical company
further its efforts to create demand-based production and worldwide
distribution of its two branded blood glucose monitoring systems for
consumer use. RR Donnelley provides material procurement and kit
assembly services as well as delivery of finished product to the
customers’ distribution hubs in North America, Europe, and Asia.
Specific responsibilities include receiving and warehousing the
hand-held glucose meters; procuring kit components such as print
materials, lancets, lancing devices, test solutions, and protective
cases; and final assembly and packaging of the retail kits.
This product postponement solution results in lower component and
finished-goods inventories, improved product availability, and greater
production flexibility. Another major benefit is the proximity of RR
Donnelley’s regional supply-chain centers to the customers’ distribution
hubs, which provide companies with improved time-to-market and
significantly reduced freight costs.
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BACKGROUND Make the Supply Chain More Demand Driven,
Flexible and Responsive
Client’s Key Reasons for The diabetes care division of this company is
Large inventories of finished goods are
Choosing RR Donnelley constantly developing products to reduce the
expensive to maintain, yet the long lead times
discomfort and inconvenience of blood glucose
■ Innovative postponement
of producing fully packaged kits in Asia
model monitoring. It introduces systems that are
necessitates large inventories to ensure product
■ Medical device experience easier and less painful to use, require less
availability. In this case, the customer wanted
(FDA/cGMP; ISO-13485) blood, and provide faster results. The company
Global presence to package the product closer to end users,
■
designs, develops, and manufactures
■ IT infrastructure thereby adding more flexibility to respond
several leading-edge glucose monitoring
and expertise to demand changes and enable inventory
systems and test strips for use in both home
■ Flexibility reductions.
and hospital settings.
■ Strong management
at all sites
Reduce Total Supply Chain Costs
■ Track record of ongoing
innovation CHALLENGE In a highly competitive segment where meter
■ Financial stability
kits are sold at a loss and profits are derived
A major acquisition strengthened the company’s
from ongoing sales of lancets and test strips,
position in the large and rapidly growing blood
controlling supply chain costs is essential to
glucose testing segment but also added to the
profitability. Unfortunately, the company’s two
complexities of gaining efficiencies in an
supply chains were both unwieldy.
already cost-sensitive marketplace. The
Manufacturing, warehousing, and shipping
customer decided to maintain both its existing
were unnecessarily complex with lots of
and newly acquired brands. It wanted to unify
opportunities to incur unanticipated expense.
and simplify its existing supply chain with that
The customer wanted a unified supply chain
of the acquisition, but the two supply chains
and a single manufacturing process. It wanted
shared little commonality in such key areas as:
to produce products closer to customers in
Scheduled reviews ■ Suppliers North America, Europe, and Asia with a
maintain communications ■ Kitting strategy goal of realizing annualized supply chain
as well as an ■ Distribution locations savings of $5 million.
environment of ■ Order systems
continuous improvement. ■ Documentation control Minimize Capital Expenditures and Resource
Requirements
After careful evaluation, the client established
these major goals: Because of the popularity of its products, the
company needed to rapidly expand capacity,
Improve Customer Satisfaction yet it desired to do so without major capital
expenditures and without overburdening the
The company believes there is one opportunity
scarce managerial resources needed to
to acquire a customer, and that acquisition can
manage other aspects of existing and newly
be worth significant lifetime value in supply
acquired businesses.
sales. Glucose meter kits must be available on
the shelf when the prospect is in the store To find a solution, the client began with a
making a decision. Backorders are disastrous, small target team that addressed issues such
generally resulting in significant lost sales. as identifying process possibilities and
potential suppliers, evaluating the suppliers,
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initiating an RFQ process, and making a final UNIFICATION/SIMPLIFICATION OF
proposal to senior management. The company SYSTEM KIT SUPPLY CHAIN
ultimately selected RR Donnelley’s innovative
product completion solution. PREVIOUS SUPPLY CHAIN
SOLUTION
RR Donnelley introduced a model that
postponed final product configuration and
kitting to increase responsiveness and lower
costs. Basic glucose meters are shipped
from the company’s contract electronics
manufacturers (CEMs) in Asia to RR Donnelley
product completion facilities in the United
States, Scotland, and Singapore where they
are kitted and shipped to the company’s
distribution centers (DCs) or held for direct
shipment to company affiliates and retailers.
RR Donnelley manages suppliers and assumes
ownership of materials until the product is fully
kitted. The entire process is cGMP/QSR and
IVDD compliant. Finished blood glucose test
kits are 100 percent serialized and fully NEW SUPPLY CHAIN
traceable. The number of print suppliers was
reduced from five to two and the locations of
the supplying facilities changed to reduce
freight costs. To minimize disruption, a phased
implementation plan was developed and
production initiated sequentially in the US,
Europe/Middle East/Africa (EMEA), and Asia.
RR Donnelley’s advanced IT solution, IViewXTTM,
was utilized to provide the company with
supply chain visibility across the key product
completion stages:
■ Sourcing/Procurement
■ Inventory Management
■ Assembly
■ Configuration
■ Customization
Grey arrows represent expensive air
shipments of finished kits.
■ Testing
Blue arrows represent less expensive
■ Packaging truck shipments of finished kits and
low-cost bulk shipments (by air or
■ Fulfillment/Distribution truck) of components.
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RESULTS
Today, the company has a single supply chain
and a uniform worldwide manufacturing
process. The postponement model is an
undisputed success that exceeded the
customer’s goal of annualized supply chain
savings of $5 million. The solution resulted
in lower component and finished-goods
inventories, improved product availability, and
greater production flexibility.
Other Key Benefits:
■ In the all-important area of freight costs,
there was a reduction of more than 70
percent per kit
■ Virtual elimination of backorders, even
when first-year demand exceeded forecasts
by 50 percent
■ Response time for unplanned orders reduced
from one month to one week
■ Dramatic simplification of the supply chain
■ Customer gained a world-class solution
while minimizing capital expense by
leveraging RR Donnelley’s assets,
infrastructure, and expertise
The results were so encouraging that the
customer wants to continue working with
RR Donnelley to achieve even higher levels of
demand-driven production and fulfillment
by transitioning to a model that involves
replenishment upon shipment to the
distribution center.
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